STARTUPS

honestbee CEO replaced; firm said to be sticking to habitat growth

STARTUPS

honestbee CEO replaced; firm said to be sticking to habitat growth

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LG scion to be interim chief; industry watchers offer mixed views on the viability of startup's strategy
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Singapore

FOLLOWING a leadership reshuffle and amid questions about its financial viability, grocery delivery startup honestbee is expected to stick with plans to open brick-and-mortar outlets in overseas markets, according to a source familiar with the company's operations.

habitat by honestbee, the company's tech-enabled supermarket and dining concept, will remain a core part of honestbee's strategy moving forward, the source told BT, speaking on the condition of anonymity as the company's strategic review is still ongoing. habitat was launched in Singapore in October 2018.

honestbee co-founder Joel Sng, who stepped down as CEO on Thursday, previously told Nikkei Asian Review in a December 2018 interview that the company plans to open cashless offline stores in three overseas markets.

The source BT spoke to declined to comment on which foreign markets habitat may launch in.

However, the individual said that as part of its broader business strategy, honestbee will continue to focus on Singapore, Taiwan and The Philippines.

BT understands that future plans for the remaining markets will depend on the strategic review.

Since its founding in Singapore in 2015, honestbee has expanded to Hong Kong, Thailand, Indonesia, Taiwan, the Philippines, Japan and Malaysia.

It did not reply to queries from BT about its overseas expansion plans for habitat.

The company earlier declined to comment on queries from BT about the financial performance of habitat and honestbee's fundraising efforts.

On Thursday, honestbee announced Mr Sng's departure as CEO, capping a week of negative newsflow on the company, including alleged cash crunch and payroll delay, according to TechCrunch. honestbee has denied the payroll delay.

Brian Koo, founding managing partner of Formation Group, will replace Mr Sng as interim CEO. US venture firm Formation Group is a key backer of honestbee.

Mr Koo is the grandson of the founder of LG, the South Korean electronics giant.

Earlier on Tuesday, honestbee announced plans to lay off 10 per cent of its global headcount and stop services in Indonesia and Hong Kong, as well as its food vertical in Thailand. honestbee is also suspending services in The Philippines and Japan.

It remains to be seen whether a cost-cutting honestbee has the means to open and maintain more offline stores.

Raja Hamzah, managing partner of RHL Ventures, was sceptical. "habitat focuses on the high-end segment of the market, which... is limited. If they're on a cash conservation strategy, then it does not make sense to continue," he said.

Jan Ondrus, associate professor of information systems at ESSEC Business School, noted that an offline strategy could build loyalty, but that it may be challenging for honestbee to enjoy the same success as Hema, the offline stores of Alibaba in China.

"The scale is different and Alibaba is able to leverage on their online dominance to beat the competition offline," he said.

However, Christopher Quek, managing partner of venture firm Trive, thinks habitat should be retained. He cited how the sporting goods outlet Decathlon has managed to build a strong logistics network despite its remote outlet in Joo Koon.

In contrast, succeeding in grocery delivery may be a tough feat. "The existing business of gig economy grocery concierge may not be the best option to sustain, as acquisition costs remain high," Mr Quek said.

Beyond the rationale for keeping habitat, many unanswered questions remain about how a once-promising startup appears to have descended into turmoil.

Mr Quek of Trive points to how RedMart highlighted the challenges of grocery delivery. "Redmart as a competitor, which had its own warehouses and logistics fleet, failed to be valued high and (reportedly) exited around US$30-40 million, when its investors put in US$55 million.

"It showed that the grocery space was not as viable as it should have been. I would surmise that honestbee tried to fundraise but did not get investors due to this reason," he said.

Meanwhile, Mr Hamzah of RHL thinks that honestbee's pivot to food delivery may be a key factor. "The grocery delivery business was already a tough place to operate in.

"honestbee then tried to pivot and expand into food delivery, which was already a saturated space with incumbents including Deliveroo and foodpanda. Both are high-burn businesses which require steep capital, which honestbee does not (appear to) have."

There remains little clarity on how exactly honestbee may have "overstretched" its finances, agreed Lawrence Loh, associate professor at the National University of Singapore Business School.

But at the very least, compared to embattled water treatment firm Hyflux, honestbee appears to have the good fortune of an "internal white knight". "They have a backer that can reasonably revive the whole company. Going forward, we can see some certainty," he said.